The Legislative Framework of the Cartel Prohibition

1.1 What is the legal basis and general nature of the cartel prohibition, e.g. is it civil and/or criminal?

Cartel prohibition is enshrined in EU law under Article 101 of the Treaty on the Functioning of the EU (“TFEU”), which outlaws “all agreements between undertakings, decisions by associations of undertakings, and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market”. This applies to undertakings only, i.e. any natural or legal person, provided they are engaged in economic or commercial activity.

As to the nature of the prohibition, EU law only provides for civil sanctions for undertakings, and leaves it to national law to lay down criminal penalties for individual participants.

1.2 What are the specific substantive provisions for the cartel prohibition?

Article 101(1) TFEU prohibits three different forms of conduct, namely:

agreements, both horizontal and vertical (between competitors and non-competitors), and whether multilateral, bilateral or unilateral;

decisions by associations of undertakings, e.g., rules requiring members to adhere to certain price levels; and

concerted practices, i.e. any direct or indirect contact between competitors with the object or effect of influencing the conduct on the market of a competitor, which comes to light under the scope of Article 101 and the coordination between undertakings which knowingly substitute practical cooperation between them for the risks of competition.

This classification is not rigid: when faced with a “whole complex of schemes and arrangements”, the Commission does not need to characterise each conduct within it as an agreement or a concerted practice; it need only show that the undertakings took part in an overall plan with a single anticompetitive objective, constituting a single infringement.

Conduct is prohibited when it has as its object or effect “the prevention, restriction or distortion of competition” within the EU. Article 101(1) provides a non-exhaustive list of practices considered anticompetitive, specifically: fixing purchase or selling prices; limiting or controlling production; sharing markets or sources of supply; applying dissimilar conditions to equivalent transactions; and subjecting the conclusion of contracts to unrelated additional obligations.

There are two limitations to the application of the prohibition under Article 101(1):

first, in order for EU law to apply, agreements need to have an effect on trade between Member States, otherwise they would be regulated, if at all, by national competition law;

and second, EU law recognises a de minimis rule as per the Commission’s 2014 Notice on agreements of minor importance: an agreement only infringes Article 101(1) if its effect on competition is likely to be appreciable, i.e. if it has sufficient impact on market conditions. Restrictions by object are not protected by the rule as the probability of negative effects is so high that there is no need to demonstrate any actual or likely anticompetitive effects.

However, under Article 101(3), an agreement covered by the scope of Article 101(1) can be exempted if it satisfies each of the following conditions: (i) it improves the production or distribution of goods; (ii) it grants a fair share of the benefit to consumers; (iii) restrictions are necessary to achieve those objectives; and (iv) it does not eliminate competition as to a substantial part of the market concerned. Exemption can be granted individually or in blocks, by category of agreement (cf. infra question 1.5). It is to be noted that although object restrictions can in theory benefit from an individual exemption, practice shows it is unlikely that they will meet the conditions set out above.

1.3 Who enforces the cartel prohibition?

The Council’s Regulation 1/2003 on the implementation of the rules on competition (“Regulation 1/2003”) designates the Commission as the main enforcement body, and more specifically, the Directorate General for Competition (“DG COMP”). However, the Regulation also confers enforcement rights upon national competition authorities (“NCAs”): when investigating cartel conduct under national law, NCAs must apply Article 101 in parallel if the conduct may affect trade between Member States; and they cannot prohibit under national law such conduct if it would not be prohibited under Article 101.

In order to coordinate activities between competition authorities, the Regulation establishes a European Competition Network (“ECN”), which allows for better coordination and the exchange of best practices. The Notice on cooperation within the Network of Competition Authorities details its functioning. Furthermore, the Commission adopted a proposal for a directive in May 2017 to strengthen the powers of national competition authorities in order to increase the efficiency of competition law enforcement. The European Parliament and the Council reached an interinstitutional agreement in May 2018 and the formal approval of the Directive is expected to happen by the end of 2018.

The Commission’s decisions are subject to judicial review by the General Court (“GC”) and the Court of Justice (“CJEU”).

1.4 What are the basic procedural steps between the opening of an investigation and the imposition of sanctions?

An investigation can be triggered in four different ways: as a result of a leniency application (the most common start); through the Commission’s own market intelligence; following a complaint from a third party; or after a reference from a NCA.

The Commission starts collecting information once it decides to pursue the matter. In that regard, its powers of investigation are quite broad and it enjoys a wide margin of discretion in using them, provided their use is necessary and proportionate. In cartel cases, the Commission generally conducts what are known as ‘dawn raids’ – unannounced parallel searches of business premises, and if need be, of private homes (cf. infra section 2).

If, on the basis of the evidence gathered during the searches, the Commission thinks that there are sufficient grounds to initiate proceedings, it will issue a statement of objections, in which it sets out the facts it relies on, the conclusions it draws and the actions it proposes to take.

The addressees of the statement of objections can then have access to the documents in the Commission’s file and expose their views in both a written and an oral response.

After having heard the parties, the Commission assesses the evidence to decide whether its original case still stands. If so, it prepares a draft decision setting out its findings and possible further action (e.g. fines). The final decision is adopted by the full College of Commissioners after consultation with an advisory committee made up of NCA representatives, and it is then notified to the concerned parties.

The length of proceedings can vary considerably. The GC’s 2017 annual report shows that the average duration of proceedings in competition law cases has gone from an average of 48.4 months in 2009 to 21.6 months in 2017. According to the GC’s vice president, there is a threshold under which it would no longer be adequate to shorten the length of cases: with a written procedure of 12 months, prolonged by six months for confidentiality requests and two for translations.

The antitrust procedure was reformed in October 2011 through the Commission’s adoption of its Best Practices for the conduct of antitrust proceedings and the expansion of the Hearing Officer’s role so as to increase interaction with the parties and strengthen procedural safeguards. In March 2012, in an attempt to further improve transparency, the Commission published its Antitrust Manual of Procedures, which gives (partial) internal guidance as to the conduct of investigations, but does not touch upon dawn raids. In September 2015 the Commission, recognising that much of the evidence that is relevant in cartel investigations is now in digital form, published an Explanatory Note on Commission inspections pursuant to Article 20 (4) of Regulation 1/2003. The Explanatory Note provides for additional considerations that companies will need to take into account if they are subject to Commission inspections, including the possible search of electronic devices by Commission officials.

1.5 Are there any sector-specific offences or exemptions?

EU competition law does not provide for any sector-specific offences or exemptions but the Commission has adopted so-called ‘block exemption regulations’ in relation to certain categories of arrangements (vertical agreements, technology transfers, specialisation agreements, R&D), shielding them from Article 101 provided they meet certain conditions.

In order for the Commission to find an infringement, the involved undertakings do not need to have a presence inside the EU and practices need not have been conducted in the EU: the essential element is whether the conduct was implemented, or had an effect, in the EU. In its September 2017 judgment in the Intel case, the CJEU confirmed that the qualified effects test was an appropriate test of jurisdiction. Therefore, if the conduct had an immediate and substantial effect in the EU, the Commission has jurisdiction to carry out competition investigations. In practice, this amounts to assessing whether the cartel may have had an impact on trade within the EU. Therefore, a cartel may be found to have been implemented within the EU even where all the participants are located outside the EU. The Commission’s decision in Capacitors in March 2018 is a recent example of the application of this principle. In this case the cartel took place mainly in Japan, but the Commission considered that the cartel had been implemented globally, including in the EEA. Commissioner Vestager stated that the Commission “will not tolerate anti-competitive conduct that may affect European consumers, even if anticompetitive contact takes place outside Europe”.

■ Right to require an explanation of documents or information supplied

Yes

N/A

■ Right to secure premises overnight (e.g. by seal)

Yes

N/A

Please Note: * indicates that the investigatory measure requires the authorisation by a court or another body independent of the competition authority.

2.2 Please list specific or unusual features of the investigatory powers referred to in the summary table.

The Commission’s investigatory powers are listed in Regulation 1/2003: it can issue requests for information, take statements, and inspect premises. Unlike many NCAs, the Commission can exercise these powers on the basis of internal administrative decisions, meaning that no prior warrant is needed. However, if the Commission wishes to inspect private premises (for example, the homes of directors of an undertaking), then this must first be authorised by the national judicial authority of the Member State concerned.

Inspections can be carried out upon production of a written authorisation or ordered by decision, in which case undertakings are required to submit to the inspection. In cartel cases, the Commission most often conducts ‘dawn raids’, i.e. unannounced searches, at both business and private premises, although for the latter it would need to obtain judicial authorisation and establish a reasonable suspicion that records related to the inspection are kept there.

The Commission is empowered to examine all business records and make copies thereof, including forensic images of electronic data. However, the Commission may only take note of documents which relate to the subject matter of the inspection. The Commission’s Explanatory Note on the conduct of dawn raids was revised in 2015 and now provides further guidance as to the Commission’s powers in relation to software and data and notably addresses the ‘Bring Your Own Device’ policy, under which the Commission can inspect employees’ personal devices and media that are used for professional reasons when they are found on the premises.

Moreover, while searching offices, the Commission can affix seals on any relevant elements, ask staff for clarifications and record the answers provided, which it cannot do when searching private premises.

2.3 Are there general surveillance powers (e.g. bugging)?

EU law does not provide the Commission with any formal surveillance powers. However, it is worth considering the 2014 GC’s judgment in the North Sea Shrimps case where the GC allowed secretly recorded telephone conversations to be used as evidence as part of the Commission decision. The GC ruled that the only relevant criterion for assessing the admissibility of evidence is reliability. Therefore, the recordings could not be deemed inadmissible on the basis that they were made in secret. The GC considered that the Commission had obtained the recording properly, and the parties had been given the opportunity to challenge the authenticity of the recordings, and therefore the Commission could use the recordings as evidence.

2.4 Are there any other significant powers of investigation?

Regulation 1/2003 does not confer any additional power on competition authorities.

2.5 Who will carry out searches of business and/or residential premises and will they wait for legal advisors to arrive?

Dawn raids are carried out by the Commission’s own team of officials. However, given that they do not have the power to force entry, they have to rely on national law enforcement authorities, who have the duty to actively assist them under Regulation 1/2003. Such assistance may be subject to a judicial authorisation under national rules, in which case Member State courts can, pursuant to the Roquette Frères case law, review the scope of the Commission’s inspection decision in order to make sure the measures intended are not arbitrary or excessive. However, national authorities may not question the necessity of a search; a request for a full review of the decision can be brought later on before the GC and CJEU. In the GC’s recent judgment in the České dráhy case, the GC clarified that the Commission is entitled to seize documents of both direct and indirect relevance during inspections, but that the scope of inspections should be determined based on documentary evidence, not just the suspicions of the Commission. This case, although it is concerned with an abuse of a dominant position, is in line with the CJEU’s reasoning in the Deutsche Bahn case that an inspection order is well-reasoned only if the subject-matter of the inspection reflects the entirety of the information that the Commission inspectors are in possession of.

The Commission can ask an NCA to carry out the inspections in its place under Article 22(2) of the Regulation, although it rarely does so. In that case, EU competition rules and not national competition rules apply.

The Commission may wait for legal counsel to arrive before commencing the inspection, but it is under no obligation to do so. The GC has held that the legality of the search is not conditional upon the presence of external legal counsel: in the Bitumen cartel case, it upheld the 10% fine uplift the Commission had imposed upon the undertaking for denying officials access to the building pending the arrival of its counsel.

2.6 Is in-house legal advice protected by the rules of privilege?

There is no express recognition of legal privilege in the TFEU; the exception was developed through case law. The CJEU recognised the right for undertakings to correspond with legal counsel without it being used against them, meaning that written communications between a lawyer and his client can be covered by legal privilege, provided they relate to the investigation and counsel is external to the company and qualified to practice in the EEA.

In-house legal advice is not protected because the independence of in-house counsel might be compromised due to their employment relationship. Privilege should, however, cover internal communications created with a view to instructing external counsel and documents prepared by in-house counsel that solely report the advice of external counsel. To avoid inadvertent disclosure in an inspection, all such documents should be marked as ‘privileged’ and filed separately.

2.7 Please list other material limitations of the investigatory powers to safeguard the rights of defence of companies and/or individuals under investigation.

In order to avoid irremediably impairing them, the CJEU has ruled that rights of defence should be respected from the outset, including during the course of preliminary procedures.

As such, parties are protected against self-incrimination to the extent that they cannot be compelled to provide the Commission with information that might lead them to admit to participating in an infringement. However, purely factual questions are not considered to be self-incriminatory and must therefore be answered.

Moreover, the Commission must clearly delimitate the scope of the inspection by defining its subject and purpose, meaning that it cannot in theory use any information it uncovers that falls outside the scope of its search, unless the documents were found ‘by chance’. However, although ‘fishing expeditions’ are not allowed, the Commission does not need to identify with absolute precision the product and geographic markets concerned by the search – the search can cover documents that have both direct and indirect relevance as long as the scope of the search is based on documentary evidence.

2.8 Are there sanctions for the obstruction of investigations? If so, have these ever been used? Has the authorities’ approach to this changed, e.g. become stricter, recently?

Pursuant to Paragraph 28 of the Commission’s Guidelines on the method of setting fines, obstruction constitutes an aggravating circumstance.

Obstruction has been assessed on a stand-alone basis in recent years – Regulation 1/2003 provides for one-off financial penalties of up to 1% of total turnover, as well as periodic penalty payments of up to 5% of the average daily turnover of a company for failure to answer a formal request fully or to submit to an inspection. The Commission has made an increasing use of these powers in the past few years. For instance, in 2012 the Commission fined Energetický a průmyslový holding and EP Investment Advisors €2.5 million for failing to block an email account as requested by the Commission and diverting incoming emails during a dawn raid. This case is not the only one in which the Commission fined companies for breaching the seal during the course of Commission inspections. Previously, in April 2010 the Commission imposed a €8 million fine on Suez Environnement and Lyonnaise des Eaux for breaching the seal and in 2012 the CJEU upheld the €38 million fine imposed by the Commission on E.ON in 2008 for breaching the seal during Commission inspections.

The Commission has increased the fine imposed on cartel participants on the basis of obstruction of investigation on the basis of refusing to answer the Commission’s oral questions. For instance, in the 2007 Professional Videotape case, the Commission increased Sony’s fine by 30% because during the inspections carried out at Sony’s premises the employees refused to answer the Commission’s oral questions.

Sanctions on Companies and Individuals

To ensure the effective enforcement of competition rules, Regulation 1/2003 gives the Commission, along with the NCAs, the power to impose fines for substantive and procedural infringements. Such fines can be imposed on any undertaking or association of undertakings and a parent company can be fined for the acts of a subsidiary on which it exercises decisive influence.

As for substantive infringements, the Commission can impose fines of up to 10% of the total turnover of the undertakings concerned if they are found to have participated, intentionally or negligently, in a cartel. The Commission enjoys a wide discretion when setting the amount of the fines and its Fining Guidelines of 2006 set out the approach it will normally follow:

First, to reflect the ‘economic significance’ of each party’s participation in the infringement, a basic amount of the fine is calculated, based on that participant’s value of sales (the value of the undertaking’s sales before VAT and other taxes to which the infringement directly or indirectly relates in the relevant geographic area within the EEA) for the last full business year of the cartel. An amount of up to 30% of the value of sales, depending on the gravity of the infringement, multiplied by the duration of that party’s participation in the infringement, will form the basic amount of the fine.

Second, the basic amount of the fine is adjusted depending on aggravating and/or mitigating circumstances. The Commission may also increase the basic amount to ensure the fine has a sufficient overall deterrent effect.

Third, the Commission will make sure the final amount of the fine does not exceed the legal cap of 10% and, finally, will apply leniency and/or settlement reductions when appropriate.

The Commission can, however, depart from the above methodology when the ‘particularities of a given case’ justify it, an option that the Commission used in the Mushroom and Envelopes cartel cases. In AC Treuhand, the CJEU confirmed that the Commission could set the amount of the fine as a lump sum for a consultancy firm with no market activities.

In 2016, the Commission imposed six fines for cartels totalling €3.73 billion. The automotive sector was under the Commission’s spotlight, with a record total fine of €2.9 billion imposed on five truck producers for price collusion in 2016. In 2017, three fines of €155 million, €68 million and €27 million were imposed in the thermal systems, car battery recycling and automotive lighting cartels, respectively, two years after the imposition of a €953 million fine in the automotive bearings cartel. The Commission also readopted its decision in the Airfreight cartel case, imposing a total of €776 million in fines. The total fines imposed by the Commission across seven decisions in 2017 amounted to €1.95 billion. The focus on the automobile sector continued in 2018 with fines of €75.4 million in the Braking Systems cartel, €76 million in the spark plugs cartel and €395.2 million in the maritime car carriers cartel issued in February. To date in 2018, fines totalling €800.7 million have been imposed.

As for procedural infringements, the Commission can impose fines of up to 1% of the total turnover of the undertakings concerned where they supply incorrect, incomplete or misleading information.

Finally, the Commission can require undertakings to bring a cartel infringement to an end and impose behavioural or structural remedies to that end, as well as periodic penalty payments to ensure compliance with such instructions.

3.2 What are the sanctions for individuals (e.g. criminal sanctions, director disqualification)?

The Commission has no power to sanction an individual, except if he is himself an undertaking. However, individuals still run the risk of being sanctioned as the majority of Member States currently have the ability to impose sanctions on individuals, including administrative fines and imprisonment sentences. Some Member States have criminal sanctions for cartel behaviour. For example, Denmark and the UK have specific criminal cartel offences, and in France, Greece and Romania, cartel behaviour can be prosecuted under each country’s fraud offences.

3.3 Can fines be reduced on the basis of ‘financial hardship’ or ‘inability to pay’ grounds? If so, by how much?

The Fining Guidelines provide that, in exceptional cases and upon request, the Commission can reduce the fine due to an undertaking’s inability to pay. Inability to pay claims can be raised during settlement discussions, as in the Mushrooms cartel case (2016). To benefit from this, undertakings must provide objective evidence that two cumulative conditions are met: (i) that paying the fine would ‘irretrievably jeopardise its economic viability’; and (ii) a specific social and economic context must be established. The Commission published an Information Note in 2010 setting out the principles to be applied in deciding whether to grant a reduction.

As for the first condition, the GC noted in North Sea Shrimps (2014) that the mere fact that the imposition of a fine might give rise or increase the risk of insolvency of the undertaking concerned is insufficient to substantiate a claim of inability to pay. As for the second condition, the GC has indicated in Donau Chemie (2013) that it could be fulfilled if the payment were to lead to an increase in unemployment or deterioration in the sectors concerned.

In practice, many requests are unsuccessful. The Commission has, however, accepted reductions to the fines of three undertakings by 50% and 25% in the Bathroom Fittings cartel (2010), as well as in the Pre-stressing Steel cartel (2010) where it granted reductions of 25%, 50% and 75% to three undertakings.

3.4 What are the applicable limitation periods?

Regulation 1/2003 sets two types of limitation periods in Articles 25 and 26.

First, the Commission’s power to impose substantive fines is subject to a five-year limitation period, while a three-year limitation period applies for the imposition of procedural fines. These limitation periods start to run from the date on which the infringement is committed or in the case of a single and continuous infringement from the date the infringement ended. Any competition authority investigation or proceeding may interrupt the limitation period, in which case time will start running afresh from the date on which the undertakings are notified of the authority’s interrupting act. The limitation period may run up until the adoption of a decision imposing a fine subject to a maximum period of 10 years for substantive violations and six years for procedural infringements. The limitation period may also be suspended whilst a decision of the Commission is subject to proceedings before the CJEU, which is particularly valuable for the Commission when it wishes to readopt a decision that has been successfully challenged.

Second, the Commission’s power to enforce both procedural and substantive fines, as well as periodic penalties, is subject to a limitation period of five years, starting from the day on which the decision becomes final. This limitation period may be interrupted by the notification of a Commission’s decision or refusal to vary the fine or by any action to enforce payment.

3.5 Can a company pay the legal costs and/or financial penalties imposed on a former or current employee?

As mentioned above in question 3.2, the Commission has no power to impose sanctions on individuals.

3.6 Can an implicated employee be held liable by his/her employer for the legal costs and/or financial penalties imposed on the employer?

See above: questions 3.5 and 3.2.

3.7 Can a parent company be held liable for cartel conduct of a subsidiary even if it is not itself involved in the cartel?

A parent company can be held jointly and severally liable for its subsidiary’s involvement in a cartel even if it has not been involved directly in the cartel itself when it is capable of exerting a decisive influence. It is presumed it can do so where it holds all (or almost all) of the shares in the subsidiary. While this presumption is in theory rebuttable, in practice it is very difficult to do so. In July 2018, the GC in the Goldman Sachs case considered that the Commission had correctly applied the presumption even if Goldman Sachs’ shareholding in the subsidiary was less than 100% (it actually varied between 84.4% and 91.1%). In this case the GC considered that Goldman Sachs could exert a decisive influence not only on the basis of the shares it held in it its subsidiary but also on the basis of its voting rights, which it could exert as if it was the sole shareholder, and its ability to influence managing decisions, such as appointing board members.

In principle, the liability of a parent company cannot extend beyond that of its subsidiary if the parent company has not been directly involved in the cartel and its liability only arises from the direct involvement of the subsidiary in the infringement. However, in 2017 the CJEU ruled in Akzo Nobel that, even though the Commission was time-barred from imposing fines on one of the Akzo’s subsidiaries involved in the cartel, the parent company could still be held liable in respect of the entire period, including for the period during which the subsidiary, against whom action was time-barred, participated in the cartel.

Leniency for Companies

4.1 Is there a leniency programme for companies? If so, please provide brief details.

The procedure to apply for leniency under EU law is set out in the Commission’s 2006 Notice on immunity from fines and reduction of fines in cartel cases (“Leniency Notice”) and the 2012 Antitrust Manual of Procedures.

Full immunity is available to the first undertaking to come forward with information of secret cartel activity that will enable the Commission to either carry out a targeted inspection or find an infringement of Article 101. A company can therefore seek immunity in two cases: (i) before the Commission has sufficient evidence to adopt an inspection decision itself; or (ii) after it already initiated an inspection but the applicant is the first to provide incriminating evidence proving the cartel conduct. In the latter case, applications are subject to a higher evidential threshold and are rarely successful in practice: immunity would only be awarded if the Commission had conducted its inspection based on its own intelligence and this inspection had not generated evidence that would allow it to find an infringement.

To apply, undertakings must provide the Commission with all the evidence they possess, along with a corporate statement comprising a detailed description of the arrangement, the exact location of the offices, and what other competition authorities they have approached or intend to approach.

In order to be eligible, prospective applicants must satisfy a number of cumulative conditions, namely: (i) they cannot have coerced another company to join the cartel or stay in it; (ii) they cannot have tampered with evidence; (iii) they must have terminated their involvement in the cartel before reporting to the Commission, unless necessary to protect the surprise element of subsequent inspections; (iv) they cannot inform others they have applied; and (v) they must genuinely, expeditiously and fully cooperate on a continuous basis.

Before formally applying, undertakings can approach the Commission anonymously and in hypothetical terms so as to establish whether the evidence they hold would be sufficient to be awarded immunity.

A company which is not entitled to full immunity may still be able to obtain a reduction in fines where it provides evidence with significant added value to the Commission’s existing file, i.e. facts previously unknown to the Commission. Applicants for reduction need to fulfil the same conditions as for immunity (except for coercion). Depending on the value of the evidence brought in, the first applicant will benefit from a reduction of between 30–50%, the second from 20–30% and others up to 20%.

Given that cartels usually affect more than one Member State and due to the lack of a central mechanism for undertakings to obtain leniency in all jurisdictions, companies usually submit applications to every relevant competition authority. In DHL Express, the CJEU ruled that leniency applications to different competition authorities for the same infringement are fully independent. An NCA that receives a leniency application referring to the undertaking’s concurrent application to the Commission does not need to consider the contents of that separate application.

The ECN aims at approximating national leniency systems through its Model Programme, which although not binding, proposes key elements such as the possibility to make summary applications before all relevant NCAs. More recently, the ‘ECN+’ initiative, which aims to empower NCAs, stresses the need for effective leniency rules (cf. infra question 9.1).

4.2 Is there a ‘marker’ system and, if so, what is required to obtain a marker?

The 2006 Notice establishes a marker system for immunity applicants and thus allows them to secure their position in line for leniency. It is a discretionary system in the sense that the Commission grants markers on a case-by-case basis, depending on the specificities of the case and the applicant’s justifications for applying.

The applicant must provide information as to cartel participants, affected markets, the duration and nature of the conduct, any parallel leniency applications, and the reasons for which the grant of a marker is necessary. Once the marker is awarded, the undertaking needs to give the information and evidence required within a set (typically short) period of time.

4.3 Can applications be made orally (to minimise any subsequent disclosure risks in the context of civil damages follow-on litigation)?

The Leniency Notice allows for the submission of oral statements. They are recorded at the Commission’s premises and form part of the Commission’s file. The Commission published a Guide to the making of oral statements in October 2013.

4.4 To what extent will a leniency application be treated confidentially and for how long? To what extent will documents provided by leniency applicants be disclosed to private litigants?

The identity of applicants is kept confidential from other companies subject to the cartel investigation until the issue of the statement of objections, and will become known to the general public at the time of the publication of the final decision. The contents of the Commission’s file are also kept confidential throughout the investigation; access is granted to the addressees of the statement of objections so as to preserve their rights of defence. This covers all documents obtained, produced or assembled during the proceedings, except for internal Commission documents such as correspondence with other competition authorities. Moreover, access to documents containing business secrets or other confidential information may be partially or totally restricted, and corporate statements submitted by leniency applicants can only be accessed on the Commission’s premises.

As for disclosure in follow-on actions for damages before Member States’ courts, the issue is governed by the applicable national rules (which must be in line with the rules contained in the Damages Directive). The Damages Directive has effectively superseded the previous position established by the CJEU that EU law does not prevent claimants from being granted access to leniency materials as long as they have been adversely affected by the infringement. National courts could thus request provision of leniency documents under national rules, while taking into account the need to strike a fair balance between the right of effective redress and the need to ensure the effectiveness of the leniency regime.

The Damages Directive and the Commission’s Notice on cooperation with national courts set out rules limiting access to the Commission’s file: national courts cannot order parties to disclose leniency statements or settlement submissions at any time, and certain documents such as the statement of objections can only be accessed after the closing of the file. Contemporaneous documents, however, can be disclosed at any time of the process, including before the Commission closing its investigation.

4.5 At what point does the ‘continuous cooperation’ requirement cease to apply?

Under the 2006 Notice, applicants must cooperate genuinely and fully with the Commission from the time they submit their application to the end of the administrative proceedings, i.e. the adoption of a final decision.

Applicants must therefore provide the Commission with accurate and complete information. More specifically, they must include any relevant information and evidence relating to the case. They must remain at the Commission’s disposal to answer any request as to the establishment of the facts, make staff available for interviews, not tamper with evidence, and not disclose any information relating to their application before the statement of objections, unless otherwise agreed. In the Deltafina case, the Commission had withdrawn conditional immunity because the applicant had breached the obligation of cooperation by disclosing its application for leniency to competitors before the Commission had launched its inspection. However, the company still benefited from a 50% fine reduction outside of the leniency framework to reward its cooperation.

4.6 Is there a ‘leniency plus’ or ‘penalty plus’ policy?

The leniency programme under EU law does not provide for any additional rewards or penalties.

Whistle-blowing Procedures for Individuals

5.1 Are there procedures for individuals to report cartel conduct independently of their employer? If so, please specify.

Individuals can either directly report a cartel to the Commission if they are willing to reveal their identity or use the new anonymous whistle-blower tool launched by the Commission in March 2017. The encrypted messaging system run by an external intermediary allows for two-way communications between individuals and the Commission. Commissioner Vestager has recently outlined the importance of this new system that comes to reinforce the Commission’s cartel detection tools.

Plea Bargaining Arrangements

6.1 Are there any early resolution, settlement or plea bargaining procedures (other than leniency)? Has the competition authorities’ approach to settlements changed in recent years?

A settlement procedure for cartel cases was introduced in July 2008. The rules governing the settlement process are laid down in Regulation 622/2008 and the Commission notice on the conduct of settlement procedures. The core feature of the settlement procedure is the formal acknowledgment of an undertaking’s participation in a cartel. Such admission is rewarded with a 10% fine reduction, as well as a limitation on any specific increase for deterrence. Settlement agreements can be reached with all participants involved in a cartel, or only with some of them (so-called ‘hybrid’ settlements).

The settlement process can be divided into three broad stages:

First, the parties and the Commission must agree to start settlement discussions. An undertaking cannot be forced to engage in a settlement and the Commission has in turn a broad discretion to determine which cartel cases are suitable for settlement, taking into account factors such as the prospect of saving time and resources and the probability of agreeing on the scope of the potential objections within a reasonable timeframe.

Second, settlement discussions will take place on a bilateral and confidential basis to assess whether it is worth settling. The parties will have the possibility to access the file and to be heard, albeit to a more limited extent than in the standard procedure. Participants can end the discussions at any time, in which case they will revert back to the normal procedure. Parties deciding to opt-out from the settlement process will not be able to rely on fining indications given during settlement discussions, as the Timab recent ruling shows.

Finally, parties must submit a formal request in the form of a settlement submission, acknowledging in ‘clear and unequivocal terms’ their liability, and indicating the maximum amount of the fine which they foresee being imposed. The Commission will then issue a formal SO and, if the parties agree with its content, will proceed with the adoption of a final decision.

Settling parties can still contest the validity of the fine ultimately imposed before the EU Courts, as Société Générale did in EUROLIBOR before withdrawing its appeal. More recently, in Printeos, an envelope producer successfully contested the fine imposed as the Commission had not sufficiently explained the variations in fine reductions applied to settling cartel participants. The Commission recently readopted a decision against Printeos, imposing the same fine. Printeos has again introduced an application for annulment of the Commission Decision to the GC which is still in progress. In November 2017, the Icap group which did not take part in the settlement proceedings in Yen Interest Rate Derivatives successfully challenged its fine before the GC. The GC ruled that the fine was insufficiently reasoned and that the Commission had not respected the presumption of innocence for companies which decline to settle with regulators.

The Commission is increasingly using the settlement procedure and settlement decisions tend to be adopted more quickly. Since 2008, the Commission has taken 29 settlement decisions, including six hybrid settlements, representing more than half of all the cartel fines imposed. The most recent decisions concern the automotive sector with the February 2018 settlements in Braking Systems, Maritime car carriers and Spark plugs. Interestingly, most of the settlement decisions have stemmed from leniency applications.

Appeal Process

Commission decisions can be appealed before the GC, within two months of the decision, by the addressees of the decision and third parties with a direct and individual interest. Actions for annulment can be brought on four grounds: lack of competence; infringement of an essential procedural requirement; infringement of the Treaties; and misuse of powers. The GC has unlimited jurisdiction to review and assess the Commission’s decisions and it may cancel, increase or decrease any fine imposed.

Following a judgment by the GC, a further appeal can be brought to the CJEU within two months of the notification of the GC judgment. The CJEU is only competent to review points of law, a breach of procedure and an infringement of EU law by the GC.

7.2 Does an appeal suspend a company’s requirement to pay the fine?

Fines imposed by a Commission decision must normally be paid within three months of notification. However, the payment of the fine can be suspended if the undertaking gives the Commission an appropriate bank guarantee and agrees to pay interest in case the appeal is unsuccessful. If an undertaking is unable to provide such guarantees, it can also apply for interim measures before the EU Courts to suspend the enforcement of the contested decision. However, the majority of applications for interim measures are unsuccessful.

7.3 Does the appeal process allow for the cross-examination of witnesses?

The Rules of Procedure of the EU Courts provide that the Judges and the Advocate General can, at the request of a party or on their own motion, ask witnesses questions. The representatives of the parties can do the same, subject to the control of the President. Cross-examination of witnesses is thus allowed but there is no absolute right to cross-examination by the parties.

Damages Actions

8.1 What are the procedures for civil damages actions for loss suffered as a result of cartel conduct? Is the position different (e.g. easier) for ‘follow on’ actions as opposed to ‘stand alone’ actions?

In Courage and Crehan, the CJEU established that any individual or business has a right to full compensation for the harm caused to them by anticompetitive practices. This right is an EU right but its exercise is governed by national rules and damages claims, either following an infringement decision (so-called ‘follow-on’ actions) or brought on a stand-alone basis. It must be initiated before national courts. In Manfredi, the CJEU recalled that victims must in that context prove that the harm suffered is the result of a violation of competition rules.

The right to full compensation is enshrined in the 2014 Damages Directive and two provisions are aimed in particular at making it easier for victims to substantiate damages claims. First, the Directive introduces a rebuttable presumption that cartel victims have suffered harm. Second, the Directive makes final infringement decisions of competition authorities (or of review courts) binding on their own national courts and prima facie evidence of infringement in courts of other Member States, therefore streamlining follow-on claims.

In addition, the Commission has issued a Communication on the quantification of harm caused by competition law infringements aimed at assisting national courts, as well as a detailed practical guide covering the types of anticompetitive harm and techniques available to quantify such harm.

Class actions or representative claims are a matter of national laws and the Damages Directive does not contain provisions on collective redress mechanisms. The Commission, however, issued in June 2013 a Recommendation on common principles for injunctive and compensatory collective redress mechanism in the Member States concerning violation of rights granted under Union Law, where it recommends the introduction of opt-in systems of collective redress as a general rule and the institution of procedural safeguards (such as a prohibition of contingency fees or punitive damages) to avoid abuses. In January 2018, the Commission published a report on the progress made by Member States implementing measures allowing for collective redress which shows that there has been a ‘limited follow-up to the Recommendation’. There are still nine Member States which do not have in place mechanisms allowing for collective claims for compensation and, according to the Commission’s report, in some Member States, collective redress systems are not used because the conditions to use them as set out in national legislation are too rigid. In its 2018 Work Program, the Commission stated in relation to consumers’ rights that it will prepare a proposal to strengthen enforcement mechanisms and collective redress for consumers.

8.3 What are the applicable limitation periods?

Limitation periods for bringing damages claims vary across Member States but the Damages Directive harmonises certain basic rules. It specifies that limitation periods must be for at least five years and should not start to run before the infringement has ceased, and the plaintiff knows or can reasonably be expected to know of the behaviour, the fact that it constitutes an infringement and the identity of the infringer. Moreover, limitation periods must be suspended or interrupted: (i) if a competition authority has initiated an investigation or other proceedings in relation to that infringement, until at least one year after the infringement decision has become final or the proceedings are terminated; and (ii) for the duration of any consensual dispute resolution.

8.4 Does the law recognise a “passing on” defence in civil damages claims?

In line with the right to full compensation, the Damages Directive makes clear that any direct or indirect purchaser in the supply chain can obtain compensation for the harm suffered. In turn, any defendant in a damages action can argue that the plaintiff passed on the whole or part of the overcharge resulting from the infringement down to the supply chain, so that the loss passed on no longer constitutes harm for which the plaintiff needs compensation (the ‘passing on’ defence). To succeed, the defendant will have to prove the existence and the extent of pass-on of the overcharge.

As Member States now need to quantify actual loss suffered at each level of the supply chain, the Commission has committed to providing guidelines for national courts. An October 2016 Study on the passing-on of overcharges was in this context published at the Commission’s request.

8.5 What are the cost rules for civil damages follow-on claims in cartel cases?

Cost rules for civil damages in follow-on claims remain within the discretion of Member States. Although the Commission acknowledged that costs associated with damages actions can be a decisive disincentive to bringing damages claims, the Damages Directive does not address that particular issue. However, the Commission has invited Member States to reflect on their cost allocation rules and highlighted the importance of the ‘loser pays’ principle, which prevails in Member States, and generally serves to filter unmeritorious cases.

8.6 Have there been any successful follow-on or stand alone civil damages claims for cartel conduct? If there have not been many cases decided in court, have there been any substantial out of court settlements?

As mentioned in question 8.1, damages claims can only be initiated before national courts. With the coming into force of the Damages Directive, it can be expected that follow-on damages will increase across the EU. To date, Germany, the Netherlands and the UK have been the most prominent jurisdictions. In recent years, there have been a significant number of follow-on damages claims introduced in the national courts of these three countries, often brought by companies and not consumers. For example, in March 2017, TenneT was awarded €23 million in damages by a Dutch court due to overcharges it suffered from ABB’s participation in the Gas Insulated Switchgear cartel. Following the Trucks decision: (i) a damages claim was submitted in the UK in July 2018 by the Road Haulage Association which is seeking a potential total of £5 billion (€5.5 billion) in compensation on behalf of its members – the difference in price paid by transport operators per truck compared to if the cartel had not existed was calculated to be €6,000; and (ii) French logistic companies have also filed a lawsuit for damages against truck makers in the Netherlands. Interestingly, DAF, one of the Trucks cartel participants, is currently facing a damages lawsuit by a logistic and freight forwarding company in Hungary. In September 2018, the Hungarian court that will rule on the case sent a request for a preliminary ruling to the CJEU asking for guidance as to where damages claims can be filed.

Following the Commission’s decisions on multilateral interchange fees, damages lawsuits against Visa and Mastercard have been introduced in the UK, including the latest by clothes retailers who have brought new lawsuits before the London High Court of Appeal against MasterCard and Visa following on from the abovementioned Commission’s decision on multilateral interchange fees.

Miscellaneous

9.1 Please provide brief details of significant, recent or imminent statutory or other developments in the field of cartels, leniency and/or cartel damages claims.

In March 2017, the Commission proposed a new directive to empower NCAs and make them more effective enforcers (the so-called ‘ECN+ initiative’). One of the proposals consists of the harmonisation of leniency programmes to ensure certain minimum guarantees to all leniency applicants. Member States meetings are currently ongoing and the Commission aims to implement the Directive by the end of 2019. As mentioned above (see question 1.3), the European Parliament and the Council reached an interinstitutional agreement in May 2018 and the formal approval of the Directive is expected to happen by the end of 2018.

9.2 Please mention any other issues of particular interest in your jurisdiction not covered by the above.

The Commission has showed an increasing interest in algorithms and their potential for ‘more effective cartels’. A paper on the impact of algorithms on pricing collusion prepared for the OECD was published in this regard in June 2017.

Acknowledgment

The authors would like to thank their colleagues, Ruba A. Noorali and Patricia Sánchez-Calero Barco, for their invaluable contributions to this chapter.

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